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7 Ways to Increase Your Net Worth

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7 Ways to Increase Your Net Worth

The more than 75 million young adults that make up the millennial generation had a lot against them as they entered adulthood. The largest and most diverse generational cohort came of age during the financial crisis. They pursued higher education at a higher rate than the two generations before them despite skyrocketing education costs, and many older millennials faced a tough job market upon graduation.

The financial crisis coincided with a boom in college and graduate school attendance. This wasn’t much of a surprise, considering education has always been considered a reliable way to increase wealth. However, a recent study by the Young Invincibles found that despite being the most college-educated generation in history, the average millennial’s net worth is still half of what the average baby boomer’s net worth was at the same age.

To explain why, the Young Invincibles looked at how an increase in student loan debt and average wages has worked against college graduates. According to the results of the study, millennials are not just being held back by student loan debt — about $27,000 on average — but they are also earning an average of 20% less than boomers earned at the same age.

Why all the concern over millennials’ net worth? We’ll explain why your net worth matters and what you can do it increase it.

What Is Net Worth?

Your net worth is fairly simple to determine. It’s what you have left over after adding up the assets you own and the debt and other financial liabilities you have as well.

In short, it’s how much you own versus how much you owe.

Your assets are a combination of the cash you have in the bank, investable assets like your 401(k) or investments in the stock market, and the current value of your home and your car.

Your liabilities are your debts. That’s essentially everything that pops up on your credit report like credit card debt, student loan debt, auto loan or mortgage (yes, equity you have built in your home is an asset, but the mortgage you took out to buy the home is a financial liability).

Calculate your net worth by subtracting your total liabilities from your total assets.

For example, you could be a doctor earning $300,000 a year, with $80,000 in savings and $100,000 in your retirement account, but if you have a mortgage worth $400,000, $130,000 in student loans to pay off, and $10,000 in credit card debt, you would have a negative net worth. ($180,000 – $540,000 = -$360,000)

How to Increase Your Net Worth

Hate to break it to you, but outside of receiving a large unexpected inheritance, there is no quick fix to growing your net worth.

However, as a millennial, time is on your side.

“Building up your financial situation takes time, a good plan, and a lot of persistence,” says Peter J. Creedon, a certified financial planner at Crystal Brook Advisors in Mt. Sinai, N.Y. “Life is about choices, and good behaviors take time to form and discipline to adhere to.”

Follow these tips to grow your net worth:

1. Work with What You Have

So, you’re saddled with student loan debt and earning 20% less than your parents’ generation, but you’re determined to grow your net worth. It may be time to make like Beyonce and turn lemons into lemonade.

“Millennials can’t change their college debt situation and may not be able to increase the wages from their full-time job,” says David J. Haas of Cereus Financial in Franklin Lakes, N.J. “So the important thing is careful money management to make the most of what they do have.”

Practicing a daily budget is an excellent first step toward increasing your net worth. If you can master the practice of spending less than you earn each day, then each week, each month, and eventually each year, you’re on your way to a higher net worth.

If you’re not into calculators and spreadsheets, there’s good news: It’s never been easier to use technology to do the hard work for you.

By automatically scheduling savings to disperse to different goals such as an emergency fund or retirement savings, “millennials can train themselves to live on less while building their net worth a little bit at a time,” says Daniel Andrews, a financial adviser at Well-Rounded Success in Greenwood VIllage, Colo.

2. Look for a job with growth potential

If you went to college and took on student debt like many millennials, chances are high that your net worth will be in the red. If that’s the case, you should focus on creating a plan to earn more and owe less over time says Allison Vanaski, a financial planner with Arcadia Wealth Management in Smithtown, N.Y.

“You shouldn’t be worried if you are young and have a negative net worth, but you should be worried if you don’t have a plan [to grow your net worth over time],” Vanaski says.

By focusing on increasing your earnings over time, you’ll have more cash on hand to pay down your debts and build up your cash reserves. All the while, you’re laying groundwork for a higher net worth.

Ask yourself if you’re in a position with room for growth or increased income because that is a surefire way to increase your networth. If you’re not, it could be time to look for a job with more opportunity for growth.

3. Take Advantage of Your Employer Benefits

One of the easiest things you can do to increase your net worth is to maximize employer benefits like a 401(k) match, flexible spending account, or health savings account.

Roger Ma is a New York-based financial planner at Life Laid Out. He says to maximize your retirement contributions to fully take advantage of any 401(k) match you get from your employer. This is like getting a guaranteed return on your retirement investments — for free.

To put this in practice, imagine your employer matches 50% of what you contribute to retirement up to 5%. At the very least, you should set aside 5% of each paycheck for your 401(k) to capture the full match.

Flexible spending or health savings accounts can seem intimidating to figure out, but they are a great way to save on health care expenses. Health care is only getting more expensive each year, and it can quickly eat away at your budget. When you put money into an FSA or HSA, you’re doing so with pre-tax dollars, giving you extra money for those costs.

Even little perks like commuter benefits can add up over time. Those accounts allow you to use pre-tax dollars to pay for transportation costs.

4. Get a Side Hustle

You might find an excellent job with great upward mobility but still not feel like you’re earning quite enough to be able to pay down your debts. Leaving your job may not be the answer if you feel you have potential to grow and earn more there. Instead, look for ways to capitalize on a talent or skill to bring in additional income.

“The job market is getting better right now. Don’t be afraid to look around to see if you can find a better job which pays more, or think about picking up a little extra money by participating in the gig economy,” says Haas.

Technology has significantly lowered the barrier to entry for many gig-type jobs. Making extra cash on a Saturday by driving for Uber, soliciting your talents on Fiverr, or helping someone get work done via TaskRabbit weren’t options for Gen-Xers. Today, almost anyone with an internet connection can make extra cash relatively easily. An added advantage for millennials is that you can use these tasks to develop job skills to increase your human capital and increase your earning potential.

5. Save Up While You Pay Down Debts

There are some things you shouldn’t do at the same time — like texting and driving — but you should definitely work on your savings and debts at the same time.

Saving while you have so much debt to pay off can feel like an impossible ask. But it’s important to prioritize savings just as much as paying down debt. Without cash reserves on the side, you’re more likely to take on more debt when unexpected expenses pop up over time (and trust us — they always do). An early savings goal should be to save at least three months of monthly expenses. Accomplish that while you make minimum payments on your other debts. Once you’ve reached that goal, you can save a little bit less and put a little bit more toward your debts.

Doing both also gets you into the habit of saving, so that once your debts are all paid down, you have already built a good habit. At that point you should start to think of how much you want to increase your savings rate instead of just getting your saving started says Vanaski.

“Saving 20% of your earnings would be a great target, but even if you can only save 5%, start there and increase it by a percentage every year,” Haas says.

6. Don’t Be Afraid to Invest

Once you’ve been able to save money for emergencies, you can begin to focus on saving for long-term goals. The best way to achieve long-term goals like retirement is to get into the market and invest. We get it — the stock market can be intimidating, especially for a generation that came of age during one of the worst financial crises in history.

According to a 2016 Bankrate study, only one-third of millennials own stock, while about 51% of Gen X-ers and 48% of baby boomers invest in the market.

Investing doesn’t have to be rocket science, and you don’t have to (and honestly, you probably shouldn’t) get into buying and selling individual stocks.

By simply setting aside 5%-10% of your paycheck in a 401(k) or IRA, you’re investing in the market. Many employer retirement plans have advisers on hand to help you pick your investments.

The important thing is to start as soon as possible, as early as possible. Time is a huge asset when it comes to investing since your earnings will have more time to grow and compound for decades.

If you’re stuck between paying down debt and investing, that’s understandable. If you have high-interest debt, like a credit card, with an APR over 8%, then you should absolutely focus on paying that debt down first and aggressively.

For more information on investing, check out these posts:

How to Set Up Your Investment Strategy for 2017

5 Things Millionaires Understand About Investing

It’s also important not to mistake making large purchases as increasing your net worth. Like we mentioned earlier, a home can be considered an asset but ONLY if the home becomes worth more than the loan you borrowed to pay for it. This is why the housing crisis of 2008 was so devastating to so many homeowners — suddenly, their homes were worth significantly less than they paid for them or could sell them for on the market.

7. Invest in Your Human Capital

Increasing your income can help you increase your net worth just a bit faster. A possible way to do that is to invest in your human capital: the skills, knowledge, and experience that you have that adds value to your worth.

Constantly develop skills related to your field or a field in which you may be interested in entering. You can use a wealth of online resources to develop your skills in various areas, such as web development, podcast editing, or management, with sites like Lynda.com or with learning courses on Linkedin. You may even consider pursuing a higher degree if the long-term benefit will outweigh the cost of education.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Credit Cards, Featured, News

Average U.S. Credit Card Debt in 2020

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Credit card balances are at all-time highs, and absent any other relief, the recent rate cuts by the Federal Reserve will do little to slow down growth in total balances that borrowers carry month to month. And while it’s still too early to know for certain, the cash crunch many households are experiencing in 2020 due to the COVID-19 pandemic may mean even greater average monthly balance increases than in recent years.

We’ve updated our statistics on credit card debt in America to illustrate how much consumers are now taking on.

  • Americans paid banks $121 billion in credit card interest in 2019. That’s up 7% from $113 billion in interest paid in 2018, and up 56% since 2014.
  • In February 2020, the average APR on credit card accounts assessed interest was 16.61%. Although the Federal Reserve has cut the key Federal Funds rate by two percentage points since mid-2019, the more recent cuts aren’t yet reflected in lower interest assessed to balances carried from month to month.
  • Total revolving credit balances are $1.05 trillion, as of February 2020. The vast amount of this balance is from spending on credit cards from banks and retailers, while $83 billion comes from revolving balances, such as overdraft lines of credit.
  • Americans carry $687 billion in credit card debt that isn’t paid in full each month. This estimate includes people paying interest, as well as those carrying a balance on a card with a 0% intro rate.
  • 43.2% of credit card accounts aren’t paid in full each month. Those who don’t pay in full tend to have higher balances, which is why the percentage of balances not paid in full (71%) is higher than the percentage of accounts not paid in full (43.2%).
  • The average credit card balance in 2019 was $6,194 for individuals with a credit card. That’s an increase from $6,040 in 2018.

Credit card use

  • Number of Americans who actively use credit cards: 184 million as of 2019, according to TransUnion.
  • Number of Americans who carry credit card debt month to month: 77 million.
    • We estimate 42% of active card users carry debt month to month, based on the Fed’s Survey of Consumer Finances.

Credit card debt

  • Total credit card debt in the U.S. (not paid in full each month): $687 billion
  • Average APR: 16.61% (also excludes those with a 0% promotional rate for a balance transfer or purchases). This estimate comes from the Federal Reserve’s monthly reporting of APRs on accounts assessed interest by banks.

The above estimates only include the credit card balances of those who carry credit card debt from month to month — they exclude balances of those who pay in full each month.

Credit card balances

  • Total credit card balances: $1.05 trillion as of February 2020, an increase of 3.3% from February 2019. This includes credit and retail cards, and a small amount of overdraft line of credit balances.
  • Average number of credit cards per consumer: 3.1, according to Experian. This doesn’t include an average of 2.5 retail credit cards.
  • Average credit card balance: $6,194. The average consumer has $1,155 in balances on retail cards.

The above figures include the credit card statement balances of all credit card users, including those who pay their bill in full each month.

Who pays off their credit card bills?

In 2019, fewer accounts were paid in full than accounts with a balance carried from month to month. According to the American Bankers Association:

  • Revolvers (carry debt month to month): 43.2% of credit card accounts
  • Transactors (use card, but pay in full): 31.1% of credit card accounts
  • Dormant (have a card, but don’t use it actively): 25.6% of credit card accounts

Delinquency rates

Delinquency rates peaked in 2009 at nearly 7%, but in 2019 delinquency rates were 2.6%, historically well below the long-term average.

Credit card debt becomes delinquent when a bank reports a missed payment to the major credit reporting bureaus. Banks typically don’t report a missed payment until a person is at least 30 days late in paying. When a consumer doesn’t pay for at least 90 days, the credit card balance becomes seriously delinquent. Banks are very likely to take a total loss on seriously delinquent balances.

Debt burden by income

Those with the highest credit card debts aren’t necessarily the most financially insecure. According to the 2016 Survey of Consumer Finances (the most recent data available), the top 10% of income earners who carried credit card debt had nearly twice as much debt than the average borrower.

However, people with lower incomes have more burdensome credit card debt loads. Consumers in the lowest earning quintile had an average credit card debt of $2,100. However, their debt-to-income ratio was 13.9%. On the high end, earners in the top decile had an average of $12,500 in credit card debt, though their debt-to-income ratio was just 4.8%.

A look at American incomes and credit card debt

Income percentileMedian incomeAverage credit card debtCredit card debt-to-income ratio
0%-20%$15,100$2,10013.9%
20%-40%$31,400$3,80012.1%
40%-60%$52,700$4,4008.3%
60%-80%$86,100$6,8007.9%
80%-90%$136,000$8,7006.4%
90%-100%$260,200$12,5004.8%

Source: 2016 Survey of Consumer Finances data

Although high-income earners have more manageable credit card debt loads on average, they aren’t taking steps to pay off the debt faster than lower-income debt carriers. If an economic recession leads to job losses at all wage levels, we could see high levels of credit card debt in default.

Generational differences in credit card use

In Q2 2019, Generation X cardholders had the highest credit card balances. The average cardholder from this generation had a balance of $8,215, according to Experian. Baby boomers held an average balance of $6,949, comparatively.

At the other end of the spectrum, millennials — who are often characterized as frivolous spenders — held significantly lower credit card balances, at $4,889. They also carry fewer (3.2) of credit cards in their wallets. Generation X carry 4.3 credit cards and baby boomers have 4.8 credit cards, on average.

How does your state compare?

Using data from Experian, as well as data from the Federal Reserve Bank of New York Consumer Credit Panel and Equifax, you can compare average credit card balances by state.

Differences in credit card debt by generation

In 2019, Generation X had more credit card debt, on average, than baby boomers, as those in their mid-40s typically have the largest amount of expenses relative to both younger and older consumers.

Methodology

In February 2020, MagnifyMoney collected and analyzed credit card data from government and industry sources, including the American Bankers Association, Federal Reserve, the Federal Deposit Insurance Corp., Experian, TransUnion and Equifax, to determine average credit card balances, interest rates, usage and delinquency rates.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Marcus by Goldman Sachs Review: GS Bank Takes on Online Savings, CDs, and Personal Loans

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Marcus by Goldman Sachs savings account

A very high interest rate and no fees make this one of the best savings accounts out there.

APY

Minimum Balance Amount

1.30%

None

  • Minimum opening deposit: None. However, you’ll need to deposit at least $1.00 if you want to earn any interest
  • Monthly account maintenance fee: None
  • ATM fee: N/A
  • ATM fee refund: N/A
  • Overdraft fee: None

This is a great account for almost anyone. However, before you click that “Learn More” button below, there are a couple of things to know.

No ATMs. First, Marcus by Goldman Sachs doesn’t offer ATM access to your savings account. You’ll either need to deposit or withdraw money by sending in a physical check, setting up direct deposits, or by moving the money to and from your other bank accounts via ACH or wire transfer.

No checking account. Second, Marcus does’t offer a corresponding checking account. That means you can only use this account as an external place to park your cash from your everyday money flow.

Keeping a separate savings account does have its benefits. For example, it’s harder to tempt yourself to withdraw the cash if you’re a chronic over-spender. But, it also means that there might be a delay of a few days if you need to transfer the money out of your Goldman Sachs online savings account and into your other checking account.

How to open a Goldman Sachs online savings account

It’s really easy to open an online savings account with Marcus by Goldman Sachs. You can do it online or over the phone as long as you’re 18 years or older, have a physical street address, and a Social Security Number or Individual Taxpayer Identification Number.

You’ll be required to sign a form which you can do online, or by mail if you’re opening the account over the phone.

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How their online savings account compares

Marcus’ online savings account can easily be described with one word: outstanding.

You’ll get a relatively high interest rate with this account, which is among the best online savings account rates you’ll find today. In fact, these rates are currently over seven times higher than the average savings account interest rate.

Even better, this account won’t charge you any fees for the privilege of keeping your money stashed there. It’s a tall order to find another bank that offers these high interest rates with terms this good.

Marcus by Goldman Sachs CD rates

Sky-high CD rates, but watch out for early withdrawal limitations.

Term

APY

Minimum Deposit Amount

6 months

0.60%

$500

9 months

0.70%

$500

12 months

1.60%

$500

18 months

1.60%

$500

24 months

1.60%

$500

3 years

1.35%

$500

4 years

1.35%

$500

5 years

1.65%

$500

6 years

1.65%

$500

  • Minimum opening deposit: $500
  • Minimum balance amount to earn APY: $500
  • Early withdrawal penalty:
    • For CDs under 12 months, 90 days’ worth of interest
    • For CDs of 12 months to 5 years, 270 days’ worth of interest
    • For CDs of 5 years or over, 365 days’ worth of interest

Marcus’ CDs work a little differently from other CDs. Rather than having to set up and fund your account all at once, Goldman Sachs will give you 30 days to fully fund your account.

Once open, your interest will be tallied up and credited to your CD account each month. You can withdraw the interest earned at any time without paying an early withdrawal penalty, but heads up: If you withdraw the interest, your returns will be lower than the stated APY when you opened your account.

If you need to withdraw the money from your CD, you can only do so by pulling out the entire CD balance and paying the required early withdrawal penalty. There is no option for partial withdrawals of your cash.

Finally, once your CD has fully matured, you’ll have a 10-day grace period to withdraw the money, add more funds, and/or switch to a different CD term. If you don’t do anything, Marcus will automatically roll over your CD into another one of the same type, but with the current interest rate of the day.

How to open a Goldman Sachs CD

Marcus has made it super simple to open up a CD. First, you’ll need to be at least 18 years old, and have either a Social Security Number or an Individual Taxpayer Identification Number.

You can open an account easily online, or call them up by phone. You’ll need to sign an account opening form, which you can do online or via a hard-copy mailed form. Then, simply fund your CD account within 30 days, and you’re all set.

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How their CDs compare

The interest rates that Marcus offers on their CDs are top-notch. In fact, a few of their CD terms are among the current contenders for the best CD rates.

If you’re interested in pursuing a CD ladder approach, Marcus is one of our top picks because each of their CD terms offer above-average rates. This means you can rest easy that you’ll get the best rates for your CD ladder without having to complicate things by spreading out all of your CDs among a handful of different banks.

The only downside to these CDs compared with many other banks is that you can’t withdraw a portion of your cash if you need it. It’s either all-in, or all-out. However, once out, you’re still free to open a new CD with the surplus cash, as long as it’s at least the $500 minimum deposit size.

Marcus by Goldman Sachs personal loan

Personal loans offered by Marcus have low APRs, flexible terms, and no fees.

Terms

APR

Credit Required

Fees

Max Loan Amount

36 to 72 months

6.99%-19.99%

Not specified

None

$40,000

Marcus by Goldman Sachs® personal loans can be used for just about anything, from consolidating debt to financing a large home improvement project. They offer some of the best rates available, with APRs as low as 6.99%, and you’ll not only be able to choose between a range of loan terms, but you can also choose the specific day of the month when you want to make your loan payments.

While there are no specific credit requirements to get a loan through Marcus, the company does try to target those that have “prime” credit, which is usually those with a FICO score higher than 660. Even with a less than excellent credit score, you may be able to qualify for a personal loan from Marcus, though, those that have recent, negative marks on their credit report, such as missed payments, will likely be rejected.

Applicants must be over 18 (19 in Alabama and Nebraska, 21 in Mississippi and Puerto Rico) and have a valid U.S. bank account. You are also required to have a Social Security or Individual Tax I.D. Number.

No fees. Marcus charges no extra fees for their personal loans. There is No origination fee associated with getting a loan, but there are also no late fees associated with missing payments. Those missed payments simply accrue more interest and your loan will be extended.

Defer payments. Once you have made on-time payments for a full year, you will have the ability to defer a payment. This means that if an unexpected expense or lost job hurts your budget one month, you can push that payment back by a month without negatively impacting your credit report.

How to apply for a Marcus personal loan

Marcus by Goldman Sachs offers a process that is completely online, allowing you to apply, choose the loan you want, submit all of your documents, and get approved without having to leave home. Here are the steps that you will complete to get a personal loan from Marcus:

  1. Fill out the information that is required in the online application, including your basic personal and financial information, as well as how much you would like to borrow and what you will use the money for.
  2. After a soft pull on your credit, and if you qualify, you will be presented a list of different loan options that may include different rates and terms.
  3. Once you have chosen the loan you want, you will need to provide additional information to verify your identity. You may also be asked for information that can be used to verify your income and you will need to provide your bank account information so that the money can be distributed.
  4. You will receive your funds 1 – 4 business days after your loan has been approved.

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How their personal loans compare

Marcus offers low APRs and flexible terms with their personal loans, but their main feature is that they have no fees. If you are looking for a straightforward lending experience with no hidden fees or costs, Marcus will be perfect for you since you won’t even have to worry about late fees if you happen to miss a payment.

While Marcus offers some great perks, you may be able to get a lower rate if you choose to go with another lender, such as LightStream or SoFi. Both of these lenders offer lower APR ranges and they don’t charge origination fees, though, LightStream will do a hard pull on your credit to preapprove you.

LendingClub and Peerform both have lower credit requirements than Marcus, but they also charge origination fees and, being P2P lending platforms, you will need to wait for your loan to be funded and you run the risk that other users might not fund your loan.

Overall review of Marcus by Goldman Sachs‘ products

Marcus has really hit it out of the park with their personal loans, online savings, and CD accounts. Each of these accounts offers some of the best features available on the market, while shrinking the fees down to a minuscule, or even nonexistent, amount. Their website is also slick and easy to use for online-savvy people.

The only thing we can find to complain about with Marcus is that they don’t offer an equally-awesome checking account to accompany their other deposit products. Indeed, it seems like Marcus has turned their former hoity-toity image around: Today, they’re a bank that we’d recommend to anyone, even blue-collar folks.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.